Over the years, I've written about a number of ostensibly private, embarrassing things here on ye olde blog. My depression. My weight. My inability to stick with...most anything. It's always been my goal to be a pretty open book here on the WINOW, and to present myself as the flawed person I really am. More than any other sensitive topic I've covered, though, people have reacted strongly to the way that I talk about money.
As I've mentioned before, I think our reticence, as a culture, to openly discuss money is to our detriment. The rules about not discussing money for the sake of being polite were made intentionally, by a wealthy upper crust trying to keep everybody else poor and quiet. I absolutely believe that. The more finance/debt-riddance/frugality/whatever blogs I read, and the more often those blogs use real numbers from people's real lives to illustrate their points, the better I feel. I think we're all better served by this level of financial transparency, even if it makes most of us really uncomfortable.
Why, then, haven't I been disclosing any details about my own finances lately?
The truth is that I am embarrassed. My new job has me making more money than I ever have before, by quite a lot, and I still have some unpaid credit card debt. Money seems to just be slipping through my fingers. It feels out of control. And having gone through everything I have with debt, and gone through it publicly on the blog, I have been really embarrassed to admit things are not currently as peachy keen as I'd like.
But I know that this shame is all part of the problem, so no more. Today, I'm going to tell you where I'm at, and tell you my plan to get out of it.
Right now, I am making approximately $2,600, post-tax, every two weeks. When I factor in my limited paid vacation, that's equal to a take-home salary of approximately $65,000 annually. I also have multiple side income streams, all of which are extremely variable and almost impossible to plan for, but which I expect to add up to between $10,000 and $15,000 post-tax in 2011. So I estimate my 2011 post-tax income total to be about $80,000.
It depends greatly on your current place in life and your own finances whether or not that sounds like a lot of money. To me, it sounds like a fortune. In comparison, my pre-tax income last year was about $65,000. And that was the highest it had ever been. Only a few years ago, my pre-tax income was under $30,000. My earning capacity has increased by a very large margin in recent years.
Income, of course, is not the only relevant number. Expenses are just as important. My current fixed expenses are:
$3,100/month to our joint account: This pays for all living expenses. Mark and I contribute to this account as a percentage of our incomes (i.e. if you make more, you pay more). This is a system we have used for years and it works very well for us.
$209/month student loan payment
$90/month gym membership (this amount covers my membership and subsidizes a membership for a less fortunate family through a program at my gym)
$15/month prescription medications
Total fixed costs: $3,414/month
If I estimate my monthly take-home at $5,200 (which is not exactly right, since I get paid every two weeks, not twice a month), that leaves $1,736 unaccounted for every month. Where is that money going?
My current non-fixed expenses look a bit like this:
$300/month charitable contributions
$100/month to savings
Total non-fixed costs: $400/month
That leaves $1,336. And that, my friends, is money that is disappearing. I have no excuse for it. I just like to buy things. That's not going to change.
Also? I have credit card debt. Not a lot--the current balance is $2,934--but some. And that needs to disappear.
And savings? I've got about $2,000 socked away personally, and Mark and I collectively have another $8,000 or so. That's it.
So, it's time for a new plan. I've read a lot of advice, and thought a lot about it. I know many people would suggest a spending fast, I don't think that's practical at this point. I don't have the self-discipline to do something like that when I'm not in trouble, and I don't feel like I'm in trouble now. Moderation seems to be a better idea. And simplicity is key. I've tried just about every budgeting plan and software idea known to man--I'm just not that interested in spending that much time thinking about it. To me, the biggest benefit to finally having some money is not having to think about it all the time.
With the help of some wise friends, this is the simple plan I came up with:
I will, starting on Monday, be giving myself an $125/week cash allowance. This allowance needs to cover everything not mentioned in my fixed and non-fixed costs above. All shopping, all eating out, all entertainment, all not-automatically deducted charitable giving. That will leave with me with $836/month to put towards my credit cards, as well as the "extra" paycheck I'll receive on the first of April (from being paid every two weeks rather than monthly). Between those two sources, the credit card debt should be gone by April 1.
After the CC debt is paid off, I will stick with the $125 weekly allowance, and all extra money (that $836, plus anything that comes in from my side gigs) will go directly into savings.
That seems really doable. There is absolutely no reason I ought to need more than $125/week for personal spending money. And I know I need to get serious about saving. Mark and I have set some fairly hefty savings goals for the next few years, with the idea that we'll have a good nest egg ready to buy a house when we move from here. I need to pull my weight with that. I know I am extremely lucky to have found this lucrative job. I've got to start making it work for me and stop being so out of control.